[bigmoneysalsa]

Here’s an idea. Have the city put a massive tax on houses that have been vacant for more than X number of months. Something really hardcore, like 1% per month. That way the title holder must lower the price to sell or rent the place out quickly.

BTW, this could also have the secondary effect of driving prices down more quickly by forcing inventory to be liquidated.

[bigmoneysalsa]

15% is ridiculous. If inflation had run at 15% the last ten years, then prices should be about quadruple what they were in 1997. Are rents 4 times higher than 1997? Is your grocery bill 4 times higher? Hell, even gas isn’t 4 times higher.
I am a big time housing bear, but I really don’t get the “CPI-is-nonsense-inflation-is-really-super-high” stuff that a lot of people here seem to believe in.

[bigmoneysalsa]

15% is ridiculous. If inflation had run at 15% the last ten years, then prices should be about quadruple what they were in 1997. Are rents 4 times higher than 1997? Is your grocery bill 4 times higher? Hell, even gas isn’t 4 times higher.
I am a big time housing bear, but I really don’t get the “CPI-is-nonsense-inflation-is-really-super-high” stuff that a lot of people here seem to believe in.

[bigmoneysalsa]

This is really easy. History shows that it’s “reasonable” to expect the cost of buying to fall back down to where it only carries a small premium over renting. So if you want to know what X income can afford to buy after the market corrects just look at what X income can afford to rent right now. At 30% of gross income, an $80k HH income can afford $2000 a month, a $120k HH income could afford $3000 a month, etc.

FWIW, there are dozens of 3 bed+ rentals in Dana Point and Laguna Niguel listed below $3000 a month (though only a handful above 2000 sf).

[bigmoneysalsa]

eccen, think of it this way. Every year in this country, millions of people make choices about what city to live in. One of the big factors in those decisions is housing prices. In the long run, individuals will tend to go to the places that they perceive to be a better value for themselves. So if prices in one area become very high relative to how attractive that area is compared to the other choices throughout the country, people at the margins will leave (or choose not to come). Most people here in So-Cal know at least a couple families who have left or are thinking about leaving, and for whom high home prices are part of that decision.

Lets say that I get hired by a big company and they give me a choice to work in Boston or Seattle. I like Seattle a little better, but not much. If home prices are very similar in both cities I will probably choose Seattle. But if home prices are double in Seattle compared to Boston, that might nudge me over the line and I choose Boston. Because I am no longer in the Seattle market, this puts downward pressure on home prices in Seattle. It’s a contrived example, but believe me millions of families make compromises just like this every year.

In the long run it is relative desirability that determines relative prices between local markets. Simple but true.

I share your frustration cow_tipping. Few people understand the concept of substitute goods and realize that it applies to housing at a national level.

[bigmoneysalsa]

Technically four out of the five reasons actually are lousy. Of course, the one that is not – Excuse No. 2: “Renting is a good deal” is kind of difficult to ignore.

[bigmoneysalsa]

sdrealtor,

While there are many subjective benefits to owning, there are also many for renting. As a white collar professional myself, the ability to easily relocate easily with 30 days notice and not have to worry about selling a house is HUGE. Considering that the tendancy is towards a more mobile labor force and that many people change jobs every few years I think this benefit is quite underrated.

However, we can argue all day about this factor or that factor. Quite frankly I think the equation is just too complicated to work out by pure reasoning… you have to look at the stats as to what the premium historically has been. There are different ways to measure that I am sure, but I bet the consensus estimate is actually quite a bit less than 20% after the taxes/etc have been factored in.

Also, don’t forget that the willingness to pay a huge premium does not imply that a huge premium must actually be paid. The price is set by the marginal buyer (people who are “on the fence” about choosing whether to rent or buy). And while there are certainly some people who would gladly pay a 100% premium (aka today’s buyers) there are also lots of people who are not willing to pay any premium at all after taxes.

The price of a venti Starbucks coffee is not set by the guy who is willing to pay $5 for it, it’s set by the guy who is willing to pay $1.80 but not $1.90.

[bigmoneysalsa]

Happy renter,

I personally liked UTC a little better, but Irvine is quite nice. There are a lot of similarities between the two such as a UC Campus, huge white-collar job center, lots of upscale apartments/condos, and an overall clean, sterile, prosperous feel.

As the others said Irvine is fairly homogenous and I wouldn’t say any area is bad. The school district is highly regarded. The crime rate is one of the lowest in the US for cities over 100K in population. The people I have met are mostly quite nice (but also more homogenus than SD). Traffic is really not an issue if you both live and work in Irvine. The surface streets are nearly always fine. If you have to get on the freeway rush hour can be fairly bad. There are nice neighboorhoods all over Irvine and if I were you I would choose something close to work.

Prices are definitely higher here than all but the nicest areas of San Diego. During my own search I found prices to be 10-15% higher than UTC on an average for comparable units. I rent in an Irvine Co apartment, and am fairly happy with them. They seem to charge a little more, but have good service, low security deposits and flexible leases. 6 months ago when I was looking there were not many good private party units on craiglist, but there seem to be more now so I would recommend you take a look.

Good luck!

[bigmoneysalsa]

The site is back at blogspot.

[bigmoneysalsa]

Do you have any specific questions? I moved to Irvine a few months ago from the UTC area.

[bigmoneysalsa]

It’s true. 7.8% to be exact. But why are you confused? OF COURSE prices rose in LA. HELLO!!! IT’S LA!!! Not some loser town like San Diego. Everyone wants to live in LA. There are lots of movie stars who will pay any price to live there, so how could prices possible fall? Prices there will never go down. They will go up and up forever!

[bigmoneysalsa]

My mistake cashman. Clearly your anecdotal evidence is far more accurate than any objective statistics I could muster. Your words are the epitome of truthiness.

[bigmoneysalsa]

Yes, median homebuyers probably have above median income. But I disagree that people have had to qualify for their loans based on income. Loose lending standards and liar loans are a big part of how the bubble formed. So although homebuyers make more than median, the cost of homes doesn’t provide much useful info about how much more.

To be fair, I suppose I was making a stupid guess of my own with the 600K number (which is about 100K below the Irvine median).

It just gets annoying to hear people try to paint Irvine as more affluent than it really is based on untrue stereotypes like Mr and Mrs Irvine. Irvine is not Laguna Beach or Newport Coast. Once the bubble bursts, I strongly suspect that median households will be able to afford more than a humdrum 2 bedroom condo, because they were able to before the bubble.

[bigmoneysalsa]

Comparing median income to median priced homes is a flawed argument.

I didn’t say the median household should be able to buy a median home. My point was that cashman has mischaracterized the facts.

The median income family is in the bottom 17% of homebuyers (assuming income proportional to price). It would be more correct to compare say the 70-75th percentile income to the median price, if you want to take statistics and make an appropriate example out of them.

I don’t know what the median homeowner household income is and neither do you. Those stats are not readily available. The idea that you can derive it as being proportional to price is laughable. You are throwing out guesses. Also, there are a non-trivial number of households above the median who rent.

[bigmoneysalsa]

Median household income in Irvine is 83K according to the Census Bureau. Such households cannot afford a 600K home, even at 5 percent rates. Get your facts straight cashman.

[Author]

Posts